John McCain

As world food prices hit a record high, protests in Egypt demand the removal of the country’s pro-American dictator, Hosni Mubarak. No one can predict with certainty whether his removal after 30 years in power would lead to a constitutional democracy, or a theocratic despotism. The likelihood of an even worse regime replacing Mubarak is real, and has been increased by the widespread diversion of cropland to produce biofuels rather than food. That in turn has led to rising food prices that have fueled unrest among the poor in the teeming slums of Egypt’s capital city of Cairo.

Increased food prices have also led to increasing support for the anti-American Muslim Brotherhood, which has ties to the terrorist group Hamas: it provides relief and welfare services in the slums, increasing its popularity in times of economic distress, and it enjoys greater support among the country’s poor than among Egypt’s smaller and more Western-oriented middle class.

The Telegraph, a leading English newspaper, calls the recent unrest in Egypt and the Middle East “food revolutions.” It points out that “biofuel mandates” have “diverted a third of the US corn crop into ethanol for cars,” reducing food supplies and driving up food prices. “So instead of growing wheat, our farmers are growing corn in order to cash in on ethanol subsidies.”

Egypt is the world’s largest wheat importer, and  imports “more than half of its food supply.” As CNBC notes, “It is food inflation that is” most fueling opposition to the Mubarak regime among the country’s poor. Egyptians have historically spent over 40 percent of their income just on food.

As Slate notes, the “anti-Western” Muslim Brotherhood “remains the only political movement” in Egypt that is “capable of providing nongovernmental charitable services. This gives it a reliable political base in the slums of Cairo and Alexandria.” Rising food prices have cemented that base, and driven previously apathetic slum-dwellers into the streets, shifting the locus of opposition away from the more Westernized middle class.

Obama has been an avid supporter of ethanol subsidies, with close links to the ethanol lobby, unlike Obama’s 2008 opponent, John McCain, who opposed ethanol subsidies. The Obama administration has pushed ethanol mandates, even though they have a history of helping spawn famines and food riots overseas. For example, the costly climate-change legislation backed by the administration contained ethanol subsidies. The administration supports them even though ethanol makes gasoline costlier and dirtier, increases ozone pollution, and increases the death toll from smog and air pollution. Ethanol production also results in deforestation, soil erosion, and water pollution.

Leading environmentalists have lamented the devastating impact of ethanol and biofuel subsidies on the global environment.

Even commentators with close links to the Obama administration have admitted that ethanol subsidies are a terrible idea. Matt Yglesias at the liberal Center for American Progress, which has close ties to the administration, admits that “ethanol subsidies aren’t a good way to clean the environment, but they’re a great way of raising the price of agricultural commodities.” Economists more critical of the Obama administration, such as Larry Kudlow, have been scathingly critical of ethanol subsidies, linking them to the recent unrest in Egypt and “skyrocketing food prices.”

Ethanol mandates also contributed to starvation, food riots, and a growing anti-American uprising in Afghanistan back in 2008.

Senator John McCain introduced a bill yesterday to combat the FCC’s push for Net Neutrality.  The “Internet Freedom Act of 2009″ would limit the FCC’s legal authority to impose Net Neutrality rules on internet service providers. McCain’s statement says:

Today I’m pleased to introduce ‘The Internet Freedom Act of 2009’ that will keep the Internet free from government control and regulation. It will allow for continued innovation that will in turn create more high-paying jobs for the millions of Americans who are out of work or seeking new employment. Keeping businesses free from oppressive regulations is the best stimulus for the current economy.

Sen. McCain’s efforts to keep the government’s hands off the ‘net are a breath of fresh air in this period of massive government expansion. Yet I can’t help but wish that such a bill might carry more weight if the its sponsor this didn’t already have a reputation for being technologically illiterate.

For further reading, check out CEI’s take on the FCC’s proposed Net Neutrality rules.



Richard Morrison and Cord Blomquist bring back special guest co-host Jeremy Lott to create the work of art known as Episode 42. We start with the continuing buzz over the Supreme Court’s next member, President Obama’s trillion dollar healthcare plan, and an update on how Hugo Chávez is turning Venezuela’s petroleum reserves into his personal piggybank. We add good news from East Texas for beer drinkers, bad news from Europe for technophiles and sad news from Philly for basketball fans.

Listen to the episode HERE.

Welcome to Episode 33 of the LibertyWeek podcast, with your hosts Richard Morrison and Cord Blomquist and technical producer (and this week’s special guest) Ryan Young. After bidding our friend Thor Halvorssen a very happy birthday, we get a fresh recap from Ryan Young on the events of the Free State Project’s recent Liberty Forum in Nashua, New Hampshire (photos). Google’s CEO spurns Twitter (transcript via TechCrunch) in Technology News, John McCain and Richard Shelby say that the government should end the bailouts and let poorly-managed banks go bankrupt, and brewers pin their hopes on robust St. Patrick’s Day sales in this week’s edition of Beer News. Next, we go abroad for Scandal Watch where the Chinese government is cracking down on sub-optimal milk quality and finally back home to America for Olympic News, where the head of the U.S. Olympic Committee is calling it quits.

The honor of Tweet of the Week™ goes to dan_hayes of Reason.tv!

Dick Morris, Bill Clinton’s shrewd former adviser, explains that support for the Wall Street bailout killed McCain’s chances of being elected president:

“Had McCain voted against the bailout of Wall Street firms and backed the Republican alternative, there is no question in my mind that he would have won. After calling attention to his “suspension” of his campaign, McCain compliantly and supinely embraced the Bush bailout backed by the Democrats. America was waiting for him to speak out against excessive government spending and against bailing out Wall Street firms for their greed.

Some will blame the war in Iraq for McCain’s defeat. Others will cite the economic crisis. But had McCain had the courage of his convictions, it would have sent a message to all voters that he was determined to change business-as-usual in Washington. By bowing to conventional wisdom, he undid the entire work of his convention and contradicted his message of independence from President Bush. His willingness to vote for the bailout package, earmarks and all, belied his pretensions of independence.”

Republican political analyst Frank Luntz agrees with Dick Morris, as does law professor and commentator Todd Zywicki, who specializes in financial, banking, and bankruptcy issues.

(We earlier explained how the bailout was dangerous and inflationary, could cause economic stagnation and future bubbles, and could result in a vast amount of veiled political extortion, favoritism, and influence-peddling that undermine democracy.)

The damage from supporting the bailout was further compounded by McCain’s foolish support for buying up all the bad mortgage loans in America at face value, a horrible idea that conflicted with his own past record of opposing corporate welfare, and cost him the support of fiscally and economically conservative (but socially liberal) newspapers like the Arlington Sun-Gazette.

I’m not sure why Matthew Yglesias chose to adopt the unpleasant leftist tactic of beginning an argument with insult (“conservatives don’t know anything about anything”) in response to a recent Corner post of mine. Yglesias also engages in shifting the goalposts, because my “enthusiastic recommendation” of a Wall Street Journal leader column was not enthusiastic for the argument he chooses to highlight, but for its expose of the tactics Sen. Dodd and co are employing in the current debate.

Let’s leave all that irrelevance aside, however, and concentrate on Yglesias’ supposed killer point, which is his characterization of the “conservative position” on Fannie and Freddie:

[T]he implied government guarantee to Fannie and Freddie might cause them to take unduly large risks, and … the very scale of those risks would mean that in the event of a crash we actually would need to bail them out despite the lack of explicit guarantee. Thus, the idea of limiting the size of the Fannie/Freddie portfolios. The point was that if the Fannie/Freddie portfolios could be kept small, then perhaps the GSEs wouldn’t be “too big to fail” and we could afford to avoid bailing them out. And if we did wind up needing to bail them out, we wouldn’t be on the hook for such an enormous amount of money.

Yglesias concedes that this concern was valid, but further argues that: [click to continue…]

At last night’s debate, Senator McCain floated a horrible idea: to have the government buy up bad mortgages and then write off part of the mortgage and reduce the interest rate so that delinquent borrowers can afford to keep living in their pricey homes.  During the debate, Senator Obama seemed to agree with this stupid idea, pointing with approval to the fact that the bailout bills he supported already permit this to a limited extent.   His only objection seemed to be that McCain was hogging credit for this awful proposal for himself.  However, Obama later raised concerns about the cost to taxpayers of McCain’s proposal.

Michelle Malkin explains why this is a terrible idea.

Having the taxpayers buy up bad loans, and write part of them off, forces homeowners who bought small houses and lived within their means to effectively pay the mortgages of those who bought large houses and can’t afford them.

I and my family live in a 60-year-old, two-bedroom house with a tiny kitchen, peeling paint, creaky floors, obsolete plumbing that backs up, and ancient electrical outlets.  My wife hates the house.  I could have purchased a beautiful new four-bedroom house less than a mile away, but that would have prevented me from getting the 5 percent rate fixed-rate mortgage and affordable monthly payments that I ended up with. 

I will now be forced to pay the mortgages of people with 5 bedroom houses, beautiful granite countertops, two-car garages, hot-tubs, and swimming pools, who are unable to afford their adjustable-rate mortgage now that interest rates have risen.

They can’t afford their mortgage, so the government thinks they need help, to rescue them from their recklessness.

I can afford to pay my mortgage, so the government will make me pay for my prudence.

Reckless lending and borrowing has been rewarded, planting the seeds of future financial crises.

And it’s not as if any pressing human need is at stake: even if they lose their homes, irresponsible borrowers will still live better than most Europeans.  Even Americans who live below the poverty line often live better, and in larger homes, than most middle-class Europeans.

As the Wall Street crisis has expanded, politicians are falling all over themselves arguing on behalf of the “little guy” against “fat cats.” But in reality, the main elements of “rescue” plans receiving a bipartisan push would represent a massive transfer of wealth from little guys and gals to fat cats’ pockets.

First, there was Treasury Secretary Hank Paulson’s $700 billion bailout the House defeated on Monday, but to be revived in the Senate as early as Wednesday night. Then there is the upper-income wealth transfer that will now be added as the cherry on top of this bailout: raising deposit insurance to bank accounts of $250,000 or more.

According to the Associated Press, both Barack Obama and John McCain on Tuesday backed lifting the deposit insurance cap to $250,000 from the current $100,000 maximum. And Federal Deposit Insurance Corporation Chairwoman Sheila Bair wants Congress to give the FDIC “emergency” authority to raise the cap to any level she deems necessary to “restore confidence” in the banking system.

But wasn’t too much confidence in the banking system in large part what got us into this mess? Deposit insurance, even at current levels, encourages “moral hazard” as consumers assume their banks are totally safe and don’t look for quality as they do with investments and so many other products.

And I’m sorry, but if you were fortunate enough to inherit or sophisticated enough to accumulate more than $100,000, you don’t need the extra protection from other taxpayers. How hard is it, under the current system, for folks with $250,000 burning holes in their pockets to find three different banks to put it in?!

This could result in billions more liabilities now on the shoulder of the average taxpayer. And even if banks had to pay increased fees to cover this instead, that would be that much less they had to lend out during the credit crunch, defeating the whole purpose.

It also would be counterproductive in the sense that there would be that much less assurance a bank’s shareholders would get anything in a goverment takeover, because laws since the savings-and-loan crisis give insured depositors first priority of any money the banks have left. With shareholders being wiped out at the failure of Washington Mutual and Wachovia, giving depositors an even larger claim to assets would further scare off potential bank investors, just at the time that banks are issuing new stock to get further cash to lend.

In fact, some of the important credit crisis fixes being discussed, such as the mechanism used in Europe of “covered bonds” to finance mortgages, recognize the need to give at least some investors an equal claim with depositors to a bank’s assets. Raising deposit insurance without these measures would be a step backward and leave things even more precarious for the nation’s banks.

At the peak of the real estate boom, there was one group of individuals who said the bubble was about to pop. They pointed to overvalued land and bad underwriting of loans. And they bet their own money on their beliefs. Who are these unsung prophets of the subprime bust: the much-maligned short-sellers, whom both Britain, as Iain Murray reported yesterday, and now the U.S. Securities and Exchange Commission temporarily want to ban in an effort to keep the share price of financials from going further down.

On Thursday, John McCain foolishly called for the ouster of SEC Chairman Chris Cox because Cox hadn’t cracked down on so-called “naked” short sellers and supposedly “kept in place trading rules that let speculators and hedge funds turn our markets into a casino.”

McCain would have been on better ground asking for Cox’s ouster based on his refusal to push for reform of the growth-killing and counterproductive Sarbanes-Oxley accounting mandates and for opposing CEI’s lawsuit against the law’s unconstitutional Public Company Accounting Oversight Board. The “naked” short-selling McCain was referring to — which doesn’t mean that someone is shorting a stock disrobed at their computer, but refers to when someone trades with shares that aren’t there — is already illegal. (Although the SEC steps recently taken to prevent it could have costly effects on broker-dealers who would have to redesign their computer systems. More on that in another blog post.)

But later that evening, Cox would apparently prove the even bigger fool by reportedly telling Congress that the SEC was going to temporarily ban all short selling! According to the Associated Press, “Cox told the lawmakers the SEC may put in a temporary emergency ban on all short-selling — not just the aggressive forms it already has targeted, according to a person familiar with the matter. The ban might apply to stocks of selected financial companies, to all financial companies or even possibly to all public companies.”

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